Tax Treatment of Cash, Property & Shares Gifted to NRIs

Gifts to Non-Resident Indians, cash, property, shares or other assets, are governed by the Income Tax Act, 1961 (taxability) and FEMA, 1999 (cross-border compliance). While many are tax-free, especially from relatives, non-relative gifts over ₹50,000 are taxable and FEMA limits apply.

This guide covers exemptions, taxable cases, asset-specific rules, post-gift implications, compliance and the latest updates. For personalized advice on large gifts, repatriation or DTAA benefits, consult experts at ezyLegal.

What Counts as a Gift?

Any sum of money, property or asset received without consideration (no payment or return obligation). Includes:

• Cash or monetary transfers.
• Immovable property (residential/commercial).
• Shares, securities or financial instruments.
• Movable assets (jewellery, art, bullion, paintings).

Fully Exempt Gifts (no tax, regardless of value):

Exemption Category	Details	Examples
From Relatives	No limit; defined in Section 56(2)(x)	Spouse, parents, children, siblings, in-laws
On Marriage Occasion	Any source/value	Wedding gifts from friends/family
Under Will or Inheritance	Any source/value	Bequest or succession
In Contemplation of Death	Donor nearing death	Gifts anticipating demise
From Institutions	Charitable/religious trusts, local authorities, educational/medical bodies	Donations from registered trusts

Relative Definition (Section 56(2)(x)):

Relationship	Included?
Spouse	Yes
Parents/Grandparents	Yes (lineal ascendants)
Children/Grandchildren	Yes (lineal descendants)
Siblings (brothers/sisters)	Yes
Spouse of above	Yes
In-laws (spouse’s parents/siblings)	Yes

Non-relatives: Taxable if aggregate value >₹50,000 in FY (entire amount taxed under “Income from Other Sources” at slab rates + surcharge/cess).

OCI/PIO follow same rules as NRIs.

Asset-Specific Rules

Asset Type	From Resident Indian	From NRI/PIO/OCI	Tax on Receipt (Non-Relative)	FEMA/Regulatory Notes
Cash/Monetary	Up to USD 250,000/FY under LRS	No limit (non-resident to non-resident)	Taxable >₹50,000	Credit to NRO; physical cash >₹2 lakh prohibited (Section 269ST penalty: 100% of amount)
Immovable Property	Allowed (residential/commercial)	Allowed if relatives; prohibited otherwise	Taxable if SDV >₹50,000	Registered gift deed mandatory; agricultural/farmhouse/plantation prohibited
Shares/Securities	Repatriable basis: RBI approval	Relatives only; 5% cap	Taxable if FMV >₹50,000	Form FC-TRS filing within 60 days; RBI approval for certain sectors
Other Movables (jewellery, art)	Within LRS limit	Generally no restrictions	Taxable >₹50,000	Banking channels recommended; no physical cash >₹2 lakh

Post-Gift Taxes

• Income from Gifted Assets: Taxable in India (rent, dividends, interest) under “Income from Other Sources”.
• Sale of Gifted Asset:
  • Holding period: Includes donor’s period.
  • Cost: Donor’s original cost (or FMV April 1, 2001 if pre-2001).
  • LTCG (>24 months property, >12/24 months shares): 12.5% without indexation (post-Budget 2024, effective FY 2024-25).
  • STCG: Slab rates + surcharge/cess.
  • Exemptions: Reinvest under 54/54F/54EC.

Repatriation: Up to USD 1M/FY after taxes; Form 15CA/CB + CA certificate required.

Donor-Side: No gift tax in India; outbound limited by LRS (USD 250,000/FY).

Real-World Examples

1. Relative Cash Gift: NRI receives ₹10 lakh from parent, fully exempt.
2. Non-Relative Penalty: ₹60,000 cash from friend, entire ₹60,000 taxed; physical cash >₹2 lakh fined 100%.
3. Property Gift & Sale: Flat from sibling, exempt; sold later: LTCG 12.5% (donor’s cost used).
4. Shares from NRI: FMV ₹80,000 gift, taxable; Form FC-TRS filed; dividends taxed.
5. Marriage Exemption: Non-relative wedding gifts, tax-free; repatriated under LRS.

These highlight the documentation’s role.

Practical Tips

• Use banking channels (no physical cash >₹2 lakh, penalty under 269ST: 100% of amount).
• Maintain gift deeds, statements, proofs.
• Declare taxable gifts in ITR-2/3 under “Other Sources” (if income > exemption limit).
• File Form 15CA/CB for remittances.
• Check DTAA for double tax relief (e.g., India-US allows credit for Indian tax paid abroad).
• Plan for AAR scrutiny on large gifts (avoid misclassifying loans as gifts).
• OCI follow same rules as NRIs.

Frequently Asked Questions on Tax Treatment of Cash, Property & Shares Gifted to NRIs

Q1. What is the tax treatment of cash gifts received by NRIs in India?

Ans1. Cash from non-relatives taxable if total >₹50,000 in FY (entire amount under “Other Sources”). From relatives or marriage, fully exempt. Physical cash >₹2 lakh prohibited (fine 100% under 269ST).

Q2. Are gifts from relatives completely tax-free for NRIs in India?

Ans2. Yes, from spouse, parents, children, siblings, in-laws, exempt regardless of value. Marriage occasion gifts also tax-free.

Q3. What types of property can be gifted to NRIs in India?

Ans3. Residential/commercial allowed; agricultural land, farmhouses, plantations prohibited. Registered gift deed mandatory.

Q4. Are shares and securities gifted to NRIs taxable?

Ans4. From non-relatives: taxable if FMV >₹50,000. Relatives exempt; RBI approval/Form FC-TRS may apply.

Q5. Can NRIs receive jewellery, art or other movable assets as gifts?

Ans5. Yes, from non-relatives taxable >₹50,000; relatives exempt. Use banking channels; LRS limits for cross-border.

Q6. What is the maximum amount a resident Indian can gift to an NRI under LRS?

Ans6. Up to USD 250,000 per FY under Liberalised Remittance Scheme.

Q7. How is capital gains tax calculated on gifted property sold by NRIs?

Ans7. LTCG 12.5% (no indexation post-2024); holding includes donor’s period; cost is donor’s original or FMV April 1, 2001 if pre-2001.

Q8. Are income and dividends from gifted assets taxable for NRIs?

Ans8. Yes, rent, dividends, interest taxable in India under “Other Sources”.

Q9. What documentation is required for gifting assets to NRIs?

Ans9. Gift deed for property, bank statements for cash, Form FC-TRS for shares. Keep records for ITR/compliance.

Q10. How can NRIs avoid penalties when receiving large gifts in India?

Ans10. Avoid physical cash >₹2 lakh (fine 100%), declare taxable in ITR, use official channels, comply with LRS/FEMA.

Q11. Is gift tax applicable on the donor side in India?

Ans11. No, India has no gift tax; LRS limits for outbound.

Q12. Can NRIs gift back to residents?

Ans12. Yes, within LRS; recipient taxes apply if non-relative >₹50,000.

Q13. What about gifts from NRI to NRI?

Ans13. No FEMA limit; tax-exempt if relatives.

Q14. How to report taxable gifts in ITR?

Ans14. Under “Other Sources” in ITR-2/3; file if total income > basic exemption.

Q15. DTAA benefits for gifted assets?

Ans15. Reduces double taxation on income/sale, e.g., India-US allows credit for Indian tax paid.

Q16. Agricultural land gifting to NRIs?

Ans16. Prohibited under FEMA, cannot gift; inheritance allowed.

Q17. Form FC-TRS filing for gifted shares?

Ans17. Yes, within 60 days for non-resident transfers.

Q18. Marriage gifts from non-relatives?

Ans18. Fully exempt, no value limit.

Q19. Inheritance vs gift tax?

Ans19. Inheritance exempt; gifts taxable if non-relative >₹50,000.

Q20. Large gift compliance tips?

Ans20. Use NRO, file ITR, keep proofs, consult for repatriation; watch AAR scrutiny on disguised loans.